Perspectives: Opinions from our network of advisors, investors, operators and analysts on the risks and opportunities they see.
The web of regulatory and individual privacy requirements in the U.S. makes it extremely difficult to be innovative in the healthcare sector.
Even so, digital pharmacies are trying to challenge brick-and-mortar competitors in the almost $300 billion pharmacy market by promising cost savings, convenience and greater access for consumers for whom a trip to the drugstore is a difficult thing.
Nicole DiMaria, a member of New Jersey-based Chiesa Shahinian & Giantomasi PC, provides healthcare corporate and regulatory counseling as part of the firm’s Healthcare and Hospitals Group. She spoke with Karma Network’s Contributing Editor Michael Moran about the regulatory and consumer trust issues facing digital pharmacies and what factors might influence whether impact investors jump in.
Michael Moran: What regulatory issues will be the biggest drivers for digital pharmacies and what will be the blockers?
Nicole DiMaria: The regulatory issue that appears to be one of the biggest drivers for the digital pharmacy industry is the move from fee-for-service to value-based purchasing and healthcare. Drug prices and consumer out-of-pocket costs are rapidly increasing, which heightens the demand for price transparency and consumer-driven healthcare.
First, digital pharmacies have the opportunity to offer their customers a software platform that allows customers to easily compare drug prices and find alternatives, ultimately making them better consumers of healthcare, increasing competition, and lowering costs.
Second, digital pharmacies can also offer personalized medication management tools, which can increase medication adherence, improve patient outcomes and, again, ultimately lower healthcare costs.
Third, digital pharmacies that have strong connections with their customers will have greater leverage in purchasing drugs directly from pharmaceutical companies where discounts can be passed on directly to the consumer.
There are a multitude of regulatory obstacles from state retail pharmacy laws, fraud and abuse laws, federal and state privacy and security laws to interstate pharmacist licensing regulations. And these laws are constantly in flux. It is difficult to succeed in this space without having a very strong understanding of the depth and nuance of the regulatory environment.
Michael Moran: How will digital pharmacies build and maintain trust among patients in this time of data mistrust?
DiMaria: First, they must demonstrate the value of data to improve customer experience. The level of convenience and value customers perceive — for instance the ease of refilling prescriptions and communicating with a pharmacist to address any concerns — can outweigh any distrust.
Second, strong privacy and security controls should be emphasized to customers. It is crucial for digital pharmacies to invest in a data infrastructure that is well vetted for security and to document their compliance with laws such as HIPAA and High Tech. Obtaining independent third-party privacy and security certifications, for example HiTrust Certification, would likely go a long way in establishing greater trust.
Michael Moran: Is there an impact investment play in digital pharma, for instance, greater patient access?
DiMaria: Impact investors would likely be intrigued by a digital pharmacy’s ability to improve patient outcomes and reduce healthcare costs, both of which are noble social endeavors.
A driving force for backing a digital pharmacy is likely the trend toward increased convenience where customers can make purchases with a few taps and find it on the smartphone, and the digital pharmacy’s ability to be seen as a vehicle for improving patient outcomes and reducing healthcare costs.
A digital pharmacy that provides the combination of convenience, reliability, and personal interaction and emphasizes its role in improving the healthcare system and leveraging valuable healthcare data would appear to be well-positioned to attract investors.
The likely deterring force in backing these companies would be the challenge in ensuring that a digital pharmacy has the right software to achieve this combination, and the challenge in navigating (an) extremely complex regulatory environment.